JAGUAR Land Rover will start manufacturing vehicles in China for the first time afterformally agreeing a £1billion joint-venture.

The Coventry-based giant announced it has struck a “milestone” deal with Chery Automobile Company and will now begin the process of constructing a new plant at Changshu near Shanghai.

Jaguars and Land Rovers will be built at the manufacturing facility as well as new joint-venture branded vehicles aimed at the Chinese market, the company said.

It comes after the Chinese government granted approval and a licence for the new partnership.

A research and development centre and engine production facility will also built as part of the venture, with the main manufacturing plant expected to be completed during 2014.

A joint statement released by the Chinese and British companies said: “We are delighted to have reached this milestone, achieved thanks to the understanding and foresight of the Chinese authorities and we want to thank them for recognising the potential of our joint venture in the fast-growing Chinese market.

“Together, we will now begin working in close collaboration on our partnership plans to harness the capabilities of our respective companies, to produce relevant, advanced models for Chinese consumers.”

Sales of Jaguars and Land Rover in China have risen by 80 per cent so far this year as the company looks to expand in the booming communist country. It was revealed last week that China had become Jaguar’s largest market – and it is set to become even more lucrative to the company.

Bob Grace, president of Jaguar Land Rover China, said China had taken over from the UK as the company’s principle market – aided by the sale of 20,000 Range Rover Evoques there this year.

But experts believe there is potential to double those sales again after the firm reported record profits of £1.5 billion last year.

Mr Grace said: “China is No.1 and, quite honestly, it has only just started, so there is still a lot of adventure up ahead.”

JLR delivered about 60,000 Jaguar and Land Rover vehicles to the Chinese market between January and October this year, an increase of almost 90 per cent over the same period last year.

The company’s full-year 2010 sales in the country totalled just above 26,000, while it rose to 42,000 last year.

It sold 314,433 cars in 2011 – its highest ever – a growth of 29.1 per cent year on year, turning over £13.5billion.